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Tuesday, January 8, 2013

Illinois politics and its public sector pension funding fiasco is definitely getting very interesting. It also has a great lesson to teach about the typical stance taken by public sector unions when times get tough. Just say no.

When the economic pie is growing, unions negotiate for larger slices for their members. Fair enough. A rising tide lifts all boats.

But when the size of the pie is shrinking, unions want to keep the bigger slices they're negotiated previously. By insisting on the exact same size slice for each of their members, they in essence define "fairness" as everybody else accepting a smaller slice. In other words, when the pie shrinks, the same for them means less for all others.

And it's the same with tax increases. Nobody wants to pay them, but everybody wants somebody else to pay more if more is to be paid.

As Democratic Senator Russell Long of Lousiana put it long ago, "Don't tax me and don't tax thee. Tax that man behind the tree." And when times are tough, imposing tax increases on all others is exactly like being unwilling to accept a smaller pie slice for oneself.

And that's the lesson of shared sacrifice and unions. Unions say no and tell the taxpayers to go to hell. At least that's what they try to do. But to pull it off, they need accomplices. And that's when their partnering Democratic Party politicians normally enter the picture. So now let's turn to underfunded public sector pensions, unions, taxpayers and Illinois politics.
The Democrats have long run the political affairs in Illinois, and the unions have long been staunch allies of the Democrats.

Now there may be a split developing in the relationship with respect to taxpayer funding of pension obligations and benefits.

"CHICAGO—Illinois legislators, caught between public-employee unions and Wall
Street credit-rating agencies, weighed a divisive plan on Monday to dig the
state out of the nation's deepest pension hole by cutting retirement
benefits.Illinois is wrestling with a $95 billion pension gap that has left it
neck-and-neck with California for the worst state credit rating in the country.
The Democrat-controlled legislature has been stalled over how to reverse its
failure over decades to adequately fund pensions for state workers.

Two competing plans are working their way through the legislature. The House
is debating a six-year freeze in the cost-of-living increase for retirees and an
increase in employee contributions, among other changes. The Senate last year
passed a bill requiring those in the pension system to choose between a
diminished cost-of- living increase and retiree health benefits.

Gov. Patrick Quinn, a Democrat, has been pushing the legislature to pass a
pension overhaul before the lame-duck session ends this week.

"The bottom line is this is tough stuff. It's hard on people. I don't blame
anyone in the General Assembly for not wanting to vote for it. I don't want to
vote for it," said Rep. Daniel Biss, a Democrat and co-author of the House plan.

Several states are struggling to right their pension funds, which have been
battered by lackluster investment returns, increases in benefits paid out and
chronic underfunding. But Illinois stands out as the worst, with only 45% of
assets needed to meet future obligations based on 2010 data, according to the
Pew Center on the States.

The Illinois House could vote Tuesday on a plan, and then the Senate would
need to act. The legislature is trying to reach a resolution before new members
are sworn in on Wednesday and lame-duck lawmakers are replaced.The proposals in both chambers face strong pushback from public-employee
unions, who have marched in the state capital for several days and flooded the
phone lines of state legislators.

"This is another chapter in the national assault on working people and on the
middle class," said Anders Lindall, a spokesman for We Are One Illinois, a
coalition of more than a dozen unions representing public employees.

Unions are threatening to sue the state, saying their current pension
benefits are protected by the Illinois Constitution. Mr. Lindall said he hopes
the legislature will consider a proposal that calls for closing tax exemptions
for businesses and increasing public-employee contributions instead of forcing
the issue into the courts.

Lawmakers have been wary of passing legislation that would eventually be
struck down, but Mr. Biss says unions are taking a narrow reading of the
Constitution, and that House legislation would prevail in a court.

"We think the fiscal emergency demands different priorities be balanced," he
said."

Summing UpWe'll stay tuned the next several days, weeks, months and years.No easy way out of this one for anyone.In the end, taxpayers are going to be the big losers, and the two questions to be answered are these: (1) how big the taxpayer losses -- er -- contributions -- will be; and (2) how much "truth avoidance" and "man behind the tree taxing" the politicians will enact.Then we'll watch the various aristocratic leaders as they try to explain to the taxpayers and public sector employees alike what they've done to them.By the way, the union leaders will be watching and critiquing from the sidelines, while throwing a kicking and screaming temper tantrum all the way. That's the way they will try to avoid taking any responsibility for the "bad stuff" that happens.And that's the way they'll try to keep their own jobs and their own membership dues provided big pie slices, too. By sitting back and criticizing those willing to do the hard work and make the tough decisions in the tough times.So let's all watch and see what happens today and beyond in the Land of Lincoln.Thanks. Bob.